BOJ Set to Hike Rates Amid Yen Volatility
The Bank of Japan (BOJ) is leaning towards raising its benchmark interest rate by 25 basis points at its two-day meeting ending September 18, according to Bloomberg. The central bank's mandate is price stability, defined as inflation around 2%, alongside issuing banknotes and conducting currency and monetary control.
The BOJ adopted ultra-loose monetary policy in 2013 via Quantitative and Qualitative Easing (QQE), using money creation to buy assets such as government and corporate bonds. In 2016, it added negative interest rates and began controlling the 10-year government bond yield. The prolonged stimulus weakened the yen, a move that intensified in 2022 and 2023 as policy divergence widened with other central banks raising rates to address decades-high inflation.
Market Implications Of BOJ Rate Hike: VT Markets is closely watching the BOJ's upcoming meeting, where policymakers are leaning toward raising the benchmark interest rate. With price risks tilted to the upside, derivative traders must prepare for a significant shift in yen-denominated assets over the coming weeks.